February inflation tops Philippine forecast

February inflation shot up to a 10-month high and surpassed the Philippine central bank’s forecast for the month mostly because of costlier food and services.

The National Statistics Office (NSO) on Friday said consumer prices rose an average of 4.3 percent last month, higher than the 3.6 percent in January and the 4.2 percent in February last year.

Excluding selected food and energy items, core inflation picked up to 3.5 percent in February from 3.3 percent in January.

“The series of price hikes in gasoline and diesel nationwide, higher electricity and water rates and increased land transport fares in many regions including NCR [National Capital Region] also contributed to the uptrend,” NSO said.

Prices of food alone picked up by an average of 4.3 percent in February from 3.1 percent in January, with fruit and vegetable prices rising an average of 12.2 percent last month from 3.1 percent previously.

Last month’s headline inflation also went past the Bangko Sentral ng Pilipinas’ (BSP) forecast range of 3 percent to 4.1 percent for February, with the year-to-date average of 3.9 near the midpoint of the central bank’s target range of 3 to 5 percent.

“This supports our view that the scope for keeping rates steady has narrowed. We will incorporate this new information in our forecast runs to see how much it moves the inflation path by, and determine if the new expected path would lead to average inflation forecast that would risk breaching the target for the policy horizon,” BSP Governor Amando Tetangco Jr. told reporters in a text message.

“It is important to remember that the BSP looks at expected price movements over a longer policy horizon, and not simply on contemporaneous inflation,” he added.

In a research note, Barclays Capital revised upwards for a second time its 2011 average inflation forecast to 4.8 percent from the earlier estimate of 4 percent and the original 3.6 percent.

“Going forward the risks are biased for further increases in domestic fuel prices as long as uncertainties in the Middle East remain. The contribution from utilities and housing also rose,” Barclays said.